Brazil's annual inflation rate increased to 4.48 percent in July 2018 from 4.39 percent in the previous month, slightly above market expectations of 4.4 percent. It was the highest rate since March 2017 mainly due to higher prices of food and transport. Still, the inflation was lower than the 4.53 percent rate seen in mid-July, as the impact of a May nationwide truckers' strike faded.

On a monthly basis, consumer prices went up 0.33 percent, following a 1.26 percent rise in June but still above market expectations of a 0.27 percent gain. Prices eased mostly for transport (0.49 percent vs 1.58 percent) and housing (1.54 percent vs 2.48 percent) while declined for food and beverages (-0.12 percent vs 2.03 percent), the category most affected by the strike, as supplies normalized across the country.

The Central Bank of Brazil voted unanimously to hold its key Selic rate at 6.50 percent on August 1st as widely expected, keeping borrowing costs at the lowest level in modern history amid below-target inflation and mixed economic data.

Policymakers underscored the effects of the halt in the transportation sector in May, negatively weighing on both the economic and inflation outlooks. Regarding the next meetings, the Committee emphasized that risks around its baseline scenario remain in both directions and reiterated that economic conditions prescribe accommodative monetary policy.

The central bank started its easing cycle in October of 2016 after the inflation rate eased from double digits. Annual inflation climbed to 4.39 percent in June 2018 from 2.86 percent in the previous month. The rate came in slightly below market expectations of 4.42 percent, still hitting the highest level since March 2017 on the back of persistent currency weakness.

The economic recovery is still taking longer than initially expected, with recent data affected by strikes. Brazil's economic activity shrank 3.34 percent month-over-month in May 2018, a month highly affected by nationwide truckers strikes, following a 0.46 percent growth in April and compared to market expectations of a 3.45 percent contraction. It was the steepest decline in economic activity since the series began in 2003. Meanwhile, Industrial production dipped 6.6 percent year-on-year in May 2018, the most since October 2016, compared to an upwardly revised 9.0 percent jump in April and market consensus of a 11.5 percent slump.

The median estimate in the last central bank poll of economists (27 July 2018) currently points to growth of 1.50 percent for 2018 (vs 1.55 percent four weeks ago) and of 2.50 percent for 2019 (unchanged). Analysts expect the Selic rate to end 2018 at 6.50 percent (unchanged).

The trade surplus in Brazil narrowed to USD 4.23 billion in July of 2018 from USD 6.29 billion a a year earlier, lower than market expectations of a USD 5.71 billion surplus. Imports reached the highest value since November of 2014, mainly due to purchase of a platform for oil extraction from China. Exports were the highest since July of 2014, mainly boosted by sales of soybeans, oil and iron ore to China.

Imports surged 49.5 percent year-on-year to USD 18.64 billion. It is the highest value since November of 2014, mainly due to a jump in purchases of intermediate goods (+28.1 percent) and capital goods (+312.7 percent). Purchases went up from China (+90.7 percent), the EU (28.9 percent) and the US (+19.9 percent).

The unemployment rate in Brazil fell to 12.4 percent in the three months to June of 2018 from 13.1 percent in the first quarter of the year. It is the third straight decline in the jobless rate, beating market expectations of 12.6 percent.

Compared with the three months ended in March 2018, the number of unemployed went down by 723 thousand to 12.966 million. Employment increased by 657 thousand to 91.237 million, with most job gains occuring in public administration, defense, social security and education (+588 thousand); industry (+286 thousand); and transportation and storage while job losses occured mainly in information, communication, financial services and real estate (-161 thousand) and internal trade (-86 thousand). In addition, both the private sector (+197 thousand) and the public sector (+392 thousand) added jobs.

The number of people in the labour force fell by 67 thousand to 104.203 million and those detached from the labour force rose by 774 thousand to 65.642 million.

Compared with the same period of 2017, the number of unemployed fell by 520 thousand from 13.486 million, while employment went up by 1001 thousand from 90.236 million.

The average real income was estimated at BRL 2,198 in the three months to June, barely unchanged from BRL 2,192 in the three months to March but above BRL 2,174 a year earlier.

Brazil's annual inflation rate jumped to 4.39 percent in June 2018 from 2.86 percent in the previous month. The rate came in slightly below market expectations of 4.42 percent, still hitting the highest level since March 2017 on the back of persistent currency weakness.

Brazil trade surplus narrowed 18 percent to USD 5.88 billion in June of 2018 from USD 7.2 billion in the corresponding month of the previous year and below market expectations of a USD 6.3 billion surplus. Exports rebounded from a fall in May but imports advanced at a higher 13.7 percent.

The unemployment rate in Brazil rose to 12.7 percent in the three months to May of 2018, compared to 12.6 percent in the December - February 2018 period and market consensus of 12.6 percent.

Compared with the three months ending in February 2018, the number of unemployed rose by 0.9 percent or 115 thousand to 13.235 million in the three months to May of 2018. Also, employment fell by 0.2 percent or 204 thousand to 90.887 million, with jobs being cut mainly in: trade (-265 thousand); information and communication, finance, real estate and professional and administrative activities (-209 thousand); domestic services (-188 thousand) and in the agricultural sector (-112 thousand). In addition, jobs were shed in the private sector with contracts or formal work (-351 thousand) while employment went up in the private sector without contracts or informal work (+307 thousand) and in the public sector (+290 thousand).

The number of people in the labour force fell 0.1 percent or 90 thousand to 104.122 million and the number of persons detached from the labour force rose by 0.7 percent or 475 thousand to 65.413 million.

Compared with the same period of 2017, the number of unemployed fell by 3.9 percent or 536 thousand from 13.771 million, while employment grew by 1.3 percent or 1199 thousand from 89.687 million.

The average real income was estimated at BRL 2,187 in the three months to May, below BRL 2,200 in the three months to February but above BRL 2,167 in the three months to May of 2017 period.

The Central Bank of Brazil kept its key Selic rate unchanged at 6.50 percent on 20 June 2018 following no change on 16 May 2018. The hold, unanimously voted, matched market expectations and was the second hold after eleven straight cuts, keeping borrowing costs at the lowest in modern history amid below-target inflation and a gradually improving economy, albeit recent mixed data.

Policymakers highlighted the temporary halt in the transportation sector in May makes it more difficult to assess the recent evolution of economic activity. They also underscored a challenging and volatile global outlook. Regarding the next meetings, the Committee emphasized that risks around its baseline scenario remain in both directions and reiterated that economic conditions prescribe accommodative monetary policy.

The central bank started its easing cycle in October of 2016 after the inflation rate eased from double digits. Consumer prices increased 2.86 percent year-on-year in May 2018 from 2.76 percent in April, against market expectations of a small decrease to 2.74 percent. It was the highest inflation rate since January, mainly due to rising prices of transport, namely fuels such as gasoline and diesel.

The economic recovery is still taking longer than initially expected, with recent mixed data. The IBC-Br index of economic activity in Brazil rose 0.46 percent month-over-month in April of 2018, compared to a downwardly revised 0.51 percent contraction in March. It was the first expansion after three consecutive declines. Year-on-year, the Brazilian economy advanced 3.70 percent on a non-seasonally adjusted basis, after shrinking 0.55 percent in March. Meanwhile, industrial output grew 8.9 percent year-on-year in April 2018, the most since April 2013, compared to a downwardly revised 1.2 percent gain in March and market consensus of a 7.7 percent surge.

The median estimate in the last central bank poll of economists (15 June 2018) currently points to growth of 1.76 percent for 2018 (vs 2.50 percent four weeks ago) and of 2.70 percent for 2019 (vs 3.00 percent). Analysts expect the Selic rate to end 2018 at 6.50 percent (+25 bps).

Annual inflation rate in Brazil increased to 2.86 percent in May 2018 from 2.76 percent in April, against market expectations of a small decrease to 2.74 percent. It was the highest inflation rate since January, mainly due to rising prices of transport, namely fuels such as gasoline and diesel. Actually, this situation motivated the nationwide truckers’ strike in the final weeks of May.

On a monthly basis, consumer prices went up 0.4 percent, after a 0.22 percent increase in April and slightly above market consensus of 0.3 percent. The most significant monthly price rises were recorded for: housing (0.83 percent vs 0.17 percent), mainly due to readjustments in electricity (3.53 percent vs 0.99 percent); transport (0.40 percent after being flat in April), due to higher cost of gasoline (3.34 percent vs 0.26 percent) and diesel (6.16 percent vs 1.84 percent); and food and beverages (0.32 percent vs 0.09 percent), for both consumption at home (0.36 percent vs 0.27 percent) and out of home (0.26 percent vs -0.22 percent).

Brazil trade surplus narrowed 22 percent from the previous year to USD 5.98 billion in May 2018, a month sharply impacted by nationwide truckers strikes. The trade surplus came in way below market consensus of USD 7.5 billion.